September 05, 2007

Statement of Chairman Dodd on President Bush’s Remarks on Housing Crisis

For too long this president has sat on his hands, as families were losing their homes and others called for action. His action today, while welcome, is late. I urge the President to get serious about this problem and to do the following: First, lenders and servicers must modify or refinance these abusive loans to make them affordable over the long-term. This is the heart of the Principles many of the leading industry players adopted at the Homeownership Preservation Summit I convened in April. Second, I support the President’s proposal to use FHA to refinance more distressed homeowners, including some delinquent borrowers. As I suggested in a letter last week, we need to explore every avenue to achieve this goal. We also need to modernize FHA. I hope the President’s aggressive support will result in a strong bipartisan vote for FHA legislation when we take it up later this Fall. Finally, we need the Federal Reserve to issue a strong regulation that will put an end to the predatory and abusive practices, including prepayment penalties and yield spread premiums that trap borrowers in expensive loans and eat away their hard-earned home equity. We need to do far more than “study” the problem of predatory lending, as the President seems to suggest. These are not new problems, despite his recent discovery. For far too long, federal regulators sat still in the face of mounting evidence of a coming foreclosure crisis. Nor is disclosure enough. Homeowners are being ripped off by brokers and lenders skilled at deceiving borrowers. American homeowners deserve real protections from these abusive practices. The Congress obligated the regulators to provide these protections in 1994; it is time they did so. In addition, the President should call for increasing portfolio caps for Fannie Mae and Freddie Mac, so they can bring more liquidity to the mortgage markets and more aggressively assist in rescuing homeowners.